Europe automaker recovery hopes lift

November car sales climb 9.5 percent in Western Europe

LONDON (CBS.MW) -- Mild recovery hopes in the European car-making sector helped to nudge European stocks higher Tuesday.

The German DAX Xetra 30 index (1876534) rose 0.29 percent at 4,231 and the French CAC 40 index (1804546) added 0.22 percent at 3,814. Losses at mobile carrier Vodafone weighed on the FTSE 100 index in London. See London markets.

Trading held to a tight range ahead of an interest rate decision from the U.S. Federal Reserve. The dollar was modestly higher vs. the euro, with one euro last worth $1.3286.

European automakers such as BMW (519000) and Renault (013190) were stronger as Western European passenger car registrations rose 9.5 percent, which the ACEA trade association called "encouraging," though calendar effects also played a role in the gains. Sales in Germany rose 11.1 percent and sales in France grew 18 percent.

The European automaking sector also was helped by an upgrade to neutral by Goldman Sachs, as concerns over a rising euro, weaker than anticipated domestic growth, rising raw materials cost and continued Asian competition are now in part priced in.

It said DaimlerChrysler (710000)
DCX
in particular is supported by its dividend yield as well as the restructuring at Mercedes. But the broker stressed "we are not turning overly optimistic on the space and still believe that earnings growth will become hard to come by in 2005."

Continuing the auto theme, Michelin (012126) improved 3.3 percent after saying overnight it was lifting the prices of tires in Europe. Michelin said the price rises should average 5 percent between now and July 2005. The price rises take into account rising raw materials costs, it said.

Danske hit by $1.93 billion deal

Recoletos shares jumped 18 percent in Madrid after the Spanish media group that is 79-percent owned by publisher Pearson
PSO, -0.19%
saw a $1.25 billion bid from management and investors. The bid values Recoletos shares at 7.20 euros per share, a 19 percent premium to Monday's close.

Pearson, which is a significant investor in MarketWatch Inc, the publisher of this report, said Recoletos' growing focus on sports, lifestyle and general publications take it further away from the FT Group's focus on business and financial news. See story.

French hotels and services group Accor (012040) was flat after it said it and Club Mediterranee (012156) see synergy gains to reach 46 million euros ($61.2 million)in 2007, of which 30 million euros for Club Med and 16 million euros for Accor.

Earlier this year, Accord bought a 28.9 percent stake in Club Med. The two companies also said they expect increasing revenues to contribute a combined 19 million euros to 2007 earnings.

Separately, Club Med shares gained 4.1 percent as it beat expectations after it said it had swung to an operating profit of 17 million euros in 2004 versus an operating loss of 6 million euros in 2003.

Shares of European Aeronautics Defense & Space (005730) fell another 4.2 percent in Paris Tuesday after losses overnight amid a SG Securities downgrade of the stock to hold from buy on a lower-than-expected 2005 guidance.

The broker said that although Airbus, which is 80 percent-owned by EADS, is forecast to deliver 350-360 aircraft in 2005, the mix will include more narrowbody models, "which have both lower price tag and lower margin than the widebody models." SG also warned that the group's operating profit "will be impacted by product launch costs and reduced maintenance work in the defense businesses."

Deutsche Boerse (581005) meanwhile recovered 2.6 percent following Monday's losses from its failed overture for the London Stock Exchange (LSE).

Euronext (005777), which is also seen as an LSE suitor, recovered 2.2 percent after Monday losses.

Zurich helped by settlement

Zurich Financial (001107539) gained 3.1 percent in Swiss trade after agreeing to settle U.S. nursing home litigation by paying $47.5 million. The settlement, which needs U.S. Bankruptcy Court approval, resolves a lawsuit against it seeking damages of approximately $421 million, which were later increased to $528 million plus costs and more than $200 million in contingent attorney fees. Zurich said it believes the settlement is "a favorable outcome."

French retailer Pinault-Printemps-Redoute (012148) ended 2 percent after it said it expects to double the size of the Gucci brand in seven years and sees revenue for its Gucci Group unit rising by at least 10 percent at constant exchange rates, with plans to get Alexander McQueen, Balenciaga and Stella McCartney units profitable by 2007. Group EBITA will grow faster than revenue, it added.

The global luxury market will be led by China from 2004 to 2007, it said, with European growth bringing up the rear.

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